OPERATIONS SPECIAL REPORT

As your direct-to-customer business continues to grow, you reach a point where the use of manual processes for managing the flow of goods in and out of your distribution center is

no longer adequate to meet your needs. Or perhaps you have an existing warehouse management system but find that the legacy technology has become dated and no longer meets your needs. How do you decide which system is best suited for your needs?

Then there’s the whole question of purchasing an installed software system, vs. one that is SaaS or cloud-based. This debate has been going on for quite some time in DTC operations, and will likely continue unabated. The answer depends on your particular busi-ness goals, requirements and budget, as well as sim-ply what works best for your situation.

The build vs. buy issue is another area of consider-ation. However, the number of businesses with the in-ternal resources to not only spec out, design and build a system, as well as perform maintenance and upgrades that meet current and future needs, is fairly small.

What are some of the main criteria in deciding if your organization has reached a growth/maturity point where it needs a warehouse system? Typically, com-panies go through a compelling event that drives such a change. For example, they may have outgrown their warehouse space and moved into a larger facility. At that point, they realize the old way of doing business – for instance, using spreadsheets and hiring more

staff – is no longer sufficient for dealing with growth in an efficient manner.

An organization moving from a 5,000-square-foot distribution center to a 30,000-square-foot one to han-dle increased volume and new products can very quickly hit a wall in terms of its old manual processes. Now suddenly warehouse technology is needed to help manage how product gets out the door to custom-ers and comes in from vendors.

Labor, productivity and technology are also key deci-sion factors when considering a warehouse system. Look at metrics such as your company’s growth curve, the local labor pool and costs, and currently installed technology. In terms of process, are you looking to move from paper-based to an RF or voice picking process? From an order volume standpoint, what is the relation-

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OPERATIONS SPECIAL REPORT

How Much WMS Functionality Do You Need? By Curt Barry

Compared to ERP and OMS systems, there are many well-developed functions that WMS providers have developed over time. But don’t ac-cept what they give you at face value. Develop your own user require-ments, matching demonstrable functions system by system.

A list of functional areas to consider:

Inbound supply chain support• Yard management of trailers• Carrier/vendor dock scheduling• Trailer stock visibility• ASN and EDI support• Support for damage, quality control and other forms of reporting

RF communication and barcode• RF communication and barcode scanning throughout the fulfillment

processes• Support for paperless processes where desired• Full bar code support for labeling pallets, cartons, products,

locations, etc.• Device support (handheld gun, Android or iOS devices)• Putaway• Multiple location and multi-warehouse location for an item• Location availability• Directed putaway; putaway confirmation

Value-added services• Kitting support, proprietary product make up, personalization, etc.• Multi-level bill of materials• Work order processing• Work in process tracking of units and costs

Slotting• Slotting product to reduce picker travel times, depending on item

sales velocity

Replenishment• Support for minimum/maximum and demand-based replenishment

of forward pick locations• Stock rotation based on methods such as FIFO, LIFO, lot number,

expiration date, etc.

Picking• Ability to manipulate the order queue to prioritize batches of orders

rather than FIFO stock orders as they’re released from the OMS• RF-directed• Voice picking• Support for MHE picking (pick to light, pick to carousel, pick to cart, etc.) • Device support

Packing and shipping • Cartonization: determining size of cartons based on products dimen-

sions, inserts, etc.• Printing customer orders and other documents

Labor management• Labor tracking to standards by department and employee• Time and attendance support for hours worked and ability to have

paid hours input• Tracking of units of work by department and employee

Dashboards, performance and KPI support• KPIs such as order flow and completion, inventory tracking, etc.• Entry and use of industry standard and internal KPIs• Operations management reporting• Implementation of productivity reporting by department and employee• Support for graphical interfaces and analytical approaches

Further deployment of voice technology• Voice-enabled applications anywhere data is collected, validated

online rather than batch and keying

Parcel manifesting• Support for multichannel (direct and wholesale)• Support for major domestic and international small parcel and LTL

carriers, shipping consortiums and rate shopping• Support for high-speed shipping systems for multiple DCs• Multi-country support• Management of export documentation• Support for best-way and least-cost rate shopping• Support for outbound ASNs to customers

Multi-warehouse scenarios• Allocation of orders based on warehouse location and item availability

with user-defined business rules• Support for inventory planning and replenishment for multi-warehouse

DC inventory control • Location control and mapping of inventory • Support for cycle counting during the business day and audit trails• Online audits of item history by location for its active life; location

history and products that have been located there• Interfaces• What is the data to be exchanged, frequency, online vs. batch, etc.?

What are the data requirements and who will develop this?

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OPERATIONS SPECIAL REPORT

ship between revenue and cost per unit in the DC? How can a warehouse system positively impact your freight costs? The answers to these questions will help you determine if it makes sense from an ROI standpoint in terms of reducing the overall cost per unit.

If you’re in a tight labor market for DTC like Cincinnati, Columbus or Louisville, a new system can make sense in terms of driving increased productivity at a lower cost. However, if relatively cheap labor is available, some com-panies can get away with throwing more personnel at operational issues – at least temporarily.

Pooja Agarwal, vice president of operations for sub-scription service Birchbox, said a main criterion for se-lecting a warehouse system is finding one that can track and tap into all inventory across channels live in one system.

“We need to have visibility into all the orders and their status,” she said. “Another big plus is having reporting functionality including inventory visibility, daily inbound and outbound activity, open orders, historical item activity and backorders. Our tech team also has quite a bit of cri-teria including ease of integration and whether or not there are APIs that can plug into our system.”

Labor needs and staffing, the current facility setup and integration with existing technology systems are all important considerations in sourcing a warehouse system, as well as how it will impact overall costs and margins, said Matt Dellos, vice president of fulfillment for Premier Performance Products.

“You need to do an analysis of how the potential fea-tures and processes will impact your business, from a cost and margin standpoint,” Dellos said. “For instance, if your current WMS has dynamic slotting, you can have multiple SKUs in a single slot, but without direct put-away, receivers will put product wherever they can find space. Your analysis needs to determine if there will be enough of an uptick in productivity by adding a system with direct putaway to justify the additional cost.”

Dellos said the analysis should break down every as-pect of the business, not just in the DC, but how a new system would impact procurement, sales, and especially end customers from a fulfillment and delivery standpoint.

WMS, WCS and WESA WMS stores and maintains a vast amount of infor-

mation, including inventory data and customer orders

and handles non-automated functions. It processes this data to determine things like daily associate work-loads and order processing.

Warehouse control system (WCS) technology came along in the mid-1990s to bridge the gap between the WMS and the warehouse floor by allocating, balancing and managing tasks executed by material handling equipment and systems in real time.

The WMS was primarily designed for batch-based in-ventory management and control within the four walls of a DC. WCS grew up organically on the automation side, handling real-time control of high-speed automated equip-ment like conveyors and shuttles. The WCS takes order-related information from the WMS, creating waves and sub-waves in the order well to get carved up and sent to the appropriate areas to be fulfilled and shipped.

Over time, the role of the WCS has expanded to encompass traditional WMS functions like inventory management, replenishing, slotting and receiving, while WMS systems are taking on some WCS tasks, so the lines are beginning to blur. On top of that, ware-house execution systems (WES) have come on the scene as a hybrid that includes functionality of both WMS and WCS.

A WES adds business process logic to WCS data. Because it’s tightly integrated with automated systems like conveyors, sortation and pick-to-light, it has near real-time visibility into DC bottleneck issues. WES also tends to be more modular than WCS, with compo-nents that include WMS, conveyor control, analytics and reporting, and integration functions.

Kevin Thompson, distribution systems manager for Cabela’s, said it’s a matter of philosophy in terms of using a WMS or a WCS as the primary logic controller of DC operations. In his system stack, he said, a WMS sits on top and the material handling technology on the bottom, with the WCS in the middle.

“You could have your WCS do all of the pick/pack/

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OPERATIONS SPECIAL REPORT

ship logic, sending items to be sorted and packaged,” Thompson said. “When packaging is completed, the information on each item is sent to shipping to deter-mine where it goes. In that scenario, all the information goes from the WMS to the WCS, and you don’t hear anything more about it until it goes out the door.”

Thompson said he prefers using a WMS as the pri-mary logic tool because it allows him to catch a pack-age and re-route it before it goes out the door if neces-sary. “If the WCS were in charge, we wouldn’t have a chance to do that,” he said.

“Some WCS implementations get very heavy, and take over a lot of the processes in the building, but we’re different from that perspective,” he said. “We like to put more logic into the WMS, and for that rea-son our WCS has been getting thinner over the past four years.” Thompson added that he didn’t agree with the prevailing logic that the capabilities of a WMS had to end at the DC, saying they can be expanded to the broader distribution network.

Pros and Cons of Cloud vs. On-Premise Software

The differences between hosted or cloud-based and the traditional on-premise installed warehouse systems have been diminished significantly in terms of performance. For larger enterprises with budget enough to invest in an on-premise installed system with staff to support it, the promise of cloud may be diminished. But for mid-market companies, the advan-tage of going to cloud storage and hosting can be sig-nificant. Cloud-based systems are designed to scale up quickly and easily.

Implementation and configuration can also be done much more quickly in a cloud environment vs. on prem-ise. A configuration layer allows this process to be com-pressed, so companies can adapt the system to deploy different methods of picking, putaway or cycle counting. Time normally allocated to configuration and implemen-tation can be reallocated to things like training, allow faster deployment and preparation of staff users.

Companies need to weigh a larger upfront cost fol-lowed by maintenance fees (installed) against transac-tion and subscription costs (cloud). System redundan-cies are another important part of the equation, as costs can vary between having the redundancy on site

vs. what the cloud hosting company offers. Another consideration is the cost of staff to maintain an installed system vs. the cost of subscription fees that cover off-site maintenance.

In considering cloud vs. on-premise systems, do an evaluation of the total cost of ownership for 1 to 5 years out, advises Curt Barry of F. Curtis Barry & Co. Over time, cloud-based systems can start costing more than on-premise installation. However, the IT is no longer being supported internally. Many companies feel the additional cost for cloud at that point is justified in order to continually receive updates and releases from dozens to even hundreds of times per year. Also, the responsibility for up time, systems environment and change of the network is the cloud provider’s as the business grows and changes.

Key Integration PointsTwo of the primary integration points for a ware-

house system are enterprise resource planning (ERP) – which tracks inventory enterprise wide – and order management system (OMS) software. Other main systems that link to and “write” in and out of a ware-house system include forecasting tools, transportation management, shipping and manifesting systems, la-bor management and customer relationship manage-ment (CRM) systems. Many modern enterprise sys-tems include modules with related functions like labor management, transportation and yard management and even order management.

Typically, a warehouse system focuses on the exe-cution layer where product is received into inventory, either at a distribution or fulfillment center. Increasingly these days, it’s also tracking store-based inventory through the ERP when companies execute omnichan-nel tactics like ship from store or ship to store. The system keeps track of physical product locations and the inbound and outbound flow of goods, helping man-agement optimize fulfillment and labor, especially in pick/pack/ship processes.

In a hosted environment, integrating to systems like an ERP or OMS can be easier and faster using web-based APIs. As long as there is in-house expertise on mapping systems, developing web APIs is fairly straightforward.

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OPERATIONS SPECIAL REPORT

and Honeywell will continue to invest in building and acquiring operations and fulfillment technology capa-bilities, as the volume of ecommerce and direct-to-cus-tomer orders continues to grow.

The “consumerization” of technology will also play a role. For instance, the ubiquity and relatively inexpen-sive nature of smartphones, as well as technology ad-vances in warehouse scanning and tracking systems, means the growing use of simpler-to-use and less ex-pensive handheld devices. Systems will also become more user-friendly for end users, especially the next generation of DC workers.

Related to this is the continuing development of warehouse hardware and software systems to sup-port end-to-end inventory and order visibility, tracking and reporting, driven by consumer demand for accu-rate, real-time order and product information.

As WES systems are described above, modularity will also be a growing trend as ecommerce and direct-to-customer merchants demand a more à la carte ap-proach to their warehouse technology suite.

“Companies want to decide which pieces to lever-age based on how their business operates,” Agarwal said. “There won’t be one-stop shops as there isn’t one way of doing DTC anymore. I think it’s definitely starting to move that way, which is why homegrown is becoming more a part of the conversation. In the past, not many people would consider it as an option be-cause of the work and investment, but companies are looking to mold their system to what they’re doing.”

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Build vs. BuyBuilding your own warehouse system or systems is

another option, but it’s not for the faint of heart. It re-quires a great deal of in-house expertise, not only for the initial build but also for ongoing maintenance, up-grades and modifications as conditions change. The internal staff also needs to be current with warehous-ing best practices.

Will it be more productive for you to have an in-house server system, handling your own maintenance and customization? Integration with existing systems is also critical and a potentially large cost area. Dellos recommends running the ROI on a build scenario based on how long you anticipate having the system, factoring in full-time staff and resource costs vs. the subscription, maintenance and customization fees as-sociated with a vendor system.

Barry said the build process could make sense given the right set of circumstances, like creative gift seller Uncommon Goods, which talked about its warehouse system development process at Operations Summit 2016. However, for many companies the time to devel-op and implement high-function systems is not realistic.

“Large WMS software providers have hundreds of de-velopers, and even smaller ones have dozens,” Barry said. “I would ask, can you really compete internally with those resources? I’m a big believer that the user commu-nity of a WMS company is the most valuable asset they have to drive the development of all sorts of new func-tions, pushing them to stay technically current.”

Where Things Are HeadedExpect to see more convergence of WMS, WCS

and WES, as those lines continue to blur. Also, major ERP and technology companies like Oracle, IBM, SAP